Question

Sales Rs 1,00,000, Cost of Goods sold Rs 80,000, Closing stock, Rs 10,000, Operating expenses Rs 5,000, freight Inward Rs 1,000, Freight outward Rs 3,000. Determine the operating profit?

• A. Rs. 15,000
• B. Rs. 25,000
• C. Rs. 24,000
• D. None

Answer 1

The correct option is A Rs. 15,000

Operating Profit = Sales - (Cost of goods sold + operating expenses)

= 1,00,000 - ( 80,000 + 5,000)

= 15,000

Notes:-

1) Freight inward is already included in cost of goods sold and hence will not be deducted from sales

2) Freight outward is an indirect expense. It is selling expense hence will not be included in the above.